Leo Haviland provides clients with original, provocative, cutting-edge fundamental supply/demand and technical research on major financial marketplaces and trends. He also offers independent consulting and risk management advice.

Haviland’s expertise is macro. He focuses on the intertwining of equity, debt, currency, and commodity arenas, including the political players, regulatory approaches, social factors, and rhetoric that affect them. In a changing and dynamic global economy, Haviland’s mission remains constant – to give timely, value-added marketplace insights and foresights.

Leo Haviland has three decades of experience in the Wall Street trading environment. He has worked for Goldman Sachs, Sempra Energy Trading, and other institutions. In his research and sales career in stock, interest rate, foreign exchange, and commodity battlefields, he has dealt with numerous and diverse financial institutions and individuals. Haviland is a graduate of the University of Chicago (Phi Beta Kappa) and the Cornell Law School.


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CURRENCIES: THE WAITING GAME © Leo Haviland November 4, 2013

Many academic, financial, and political circles have long been married to “free market” ideologies. Nevertheless, the manipulation, maneuvering, or managing of a nation’s currency level and trends often occupies the deliberations and behavior of that territory’s central bankers, finance ministers, and many politicians. As in their efforts to control or at least influence interest rates (or stock marketplace trends), sometimes their reasoning, actions, and targets are explicit, often they are implicit.

Currency considerations are not islands apart from interest rate, stock, real estate, commodity and other marketplaces. So policy makers enamored of free market propaganda do not necessarily restrict their efforts to affect economic results to their home currency (or that currency’s cross rate relationship to one or more key trading partners). For example, picture the Federal Reserve Board’s longstanding yield repression policy, which has pinned the Federal Funds rate close to the ground.

Although the majority of currency observers and strategists focus their attention on crucial cross rates such as the US dollar against the Euro FX, broad real trade-weighted (effective) exchange rates influence important national policymakers. Analysis of these trade-weighted measures can unveil signs as to important (even if implicit) levels watched by central bank, finance ministry, and political guardians. Such trade-weighted foreign exchange measures consequently provide instruction as to potential strategy responses or changes by these often-vigilant sentinels. National and international policymakers of course are not the only ones looking and waiting around in marketplace games; Wall Street and Main Street likewise wait, watch, and act. Because these broad foreign exchange indicators (and the underlying cross rates) interrelate with perspectives on and decisions relating to current and potential elevations of and movements in numerous interest rate, stock, and other marketplaces, they offer insight into past, present, and future levels and trends of these arenas.

Dollar weakness does not necessarily (inevitably; forever) encourage or reflect a strong American economy or continue to help propelling US equities upward. Suppose a significant run against the “dollar in general” (TWD) occurs, whether via Chinese renminbi, Japanese Yen, or Euro FX (or other currency) strength against the dollar. A TWD dollar dive (especially under the July 2011 low) could force the Fed to significantly reduce or even abandon its interest rate repression and quantitative easing (money printing) policies. Consequently the effort by many American leaders and businesses promoting further weakness in the dollar relative to the renminbi may have some enthralling consequences not only for the dollar in general, but also for American (and other international) interest rate and equity marketplaces.

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Currencies- the Waiting Game (11-4-13)


Some United States stock sector energy-related indices such as the XOI, OSX, XNG, and RPE stand at a crossroads between the commodities related to them and broader equity benchmarks like the S+P 500.

Such relatively narrow energy-related equity estates intersect with the overall United States (and global) economy, not just energy provinces. The energy-related indices also entwine with their “underlying” commodities such as petroleum and natural gas. An equity index vehicle containing corporations involved in the petroleum industry reflects to some extent price levels and bull and bear trends in “underlying” (related) oil prices. These (and other) narrow United States stock sector indices therefore sometimes provide helpful viewpoints for (confirm, reflect) past, current, and future paths for broader stock indices such as the S+P 500 and Dow Jones Industrial Average, as well as for commodities “in general”. Many embrace the broad Goldman Sachs Commodity Index as a worthy indicator for the overall commodity world.

What do these four energy-related equity sectors flag nowadays to S+P 500 and commodity marketplace fans? Given their association (connection) to the broad GSCI (and that their directional walks have been roughly similar to those of the GSCI), and given the GSCI’s failure (so far) to match or venture over its spring 2011 peak, players should monitor closely whether the energy-related stock indices can sustain advances over their spring 2011 heights. Failure to do so would warn of weakness in the broad GSCI. Especially given the proximity of the major resistance levels in the S+P 500 (and that in the DJIA), the inability of these energy-related stock indices to sustain levels well above their springtime 2011 tops would confirm (or at least warn of) a downtrend in the S+P 500 as well.

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Commodity Crossroads- Energy-Related Equity Indices (2-15-13)

SLACKING OFF- OUTPUT GAPS AND FED EASING © Leo Haviland, October 25, 2011

In marketplaces and elsewhere in culture, there are many gaps. We deal with information gaps. Individuals and institutions seek to fill in holes in their knowledge by gathering additional information and evaluating what they have accumulated.

Politicians demonstrate credibility and leadership gaps. The US fiscal deficit disaster situation is merely one of many examples.

One very important gap discussed by the International Monetary Fund, the Federal Reserve Board, and other economic players is the output gap. Why not investigate that topic? The Fed and other key players make key decisions significantly influenced by their views on this measure.

Output gap estimates about any given current and future output gap situation (and therefore to some extent even regarding past gaps) probably are much less reliable than the Fed’s orations on the subject would have its audiences believe. The Fed is making decisions that are significantly based on very conjectural resource slack information.

Moreover, some evidence indicates the US output gap is less extreme than the Fed believes. What follows? The Fed’s sustained effort to pin interest rates near the floor (and thus beneath even low inflation levels) as well as its past money printing (quantitative easing) adventures fought to ignite and sustain economic recovery. However, if it has overestimated the US output gap significantly, its policies have increased the risk of creating not only inflation (however long it may take for that to appear), but also more inflation than it and many others see as desirable.

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Slacking Off – Output Gaps and Fed Easing (10-25-11)